Economics and the Rigorous Analysis of Class Certification in Antitrust Cases
26 June 2007
By Dr. Gregory K. Leonard and former NERA Vice President Dr. John H. Johnson IV
Defendants in Sherman Act Section 1 class action cases have historically faced a low likelihood of success in their attempts to defeat class certification. This is in part because courts often started from a presumption that all class members were harmed by price-fixing. Recent trends in recent judicial decisions, however, have suggested that courts are starting to take a harder look at whether classes should be certified in Section 1 cases. In this article from the Journal of Competition Law and Economics, NERA Senior Vice President Dr. Gregory K. Leonard and former Vice President Dr. John H. Johnson demonstrate that in many cases the presumption of harm on all class members is not justified. Instead, given the economic characteristics of many industries, rigorous economic analysis is required to determine whether antitrust impact for each proposed class member can be established using common proof. Dr. Johnson and Dr. Leonard find that determining whether this condition holds in a given situation generally requires that analyses based on individual data be performed—exactly the outcome that the use of the class action mechanism is intended to avoid. The authors find that this creates a "common proof paradox" in Section 1 cases, and they demonstrate that the potential hurdles for class certification are even greater in Sherman Act Section 2 cases.
